Machinery makers 'need to retool' as business changes on several fronts

"Private companies have played an important role in this stage of industrial restructuring and upgrading," said Cai.

"By generating more than half of the machinery industry's revenue and profit, private companies keep the entire industry stable."

According to the federation, private companies generated revenue of 11.6 trillion yuan from their core businesses, up 15.4 percent, which was 1.6 percentage points more than the industry average.

Private companies made total profits of 758.5 billion yuan last year, accounting for 53.6 percent of the total for the industry. Annual profit growth for the private sector was 14.6 percent.

Thanks to the strong competitiveness of private companies, State-owned machinery producers have been under pressure to improve product quality and production efficiency to survive in the market, said Cai.

"China's machinery industry is more active and robust than other monopolistic industries in the country," he said.

The country's machinery sector began to falter in 2011 after years of approximately 30 percent annual growth, because of excess capacity and a slowing economy.

In 2012, the industry's total profits stood at 1.23 trillion yuan, up 5.18 percent - a sharp drop of 16 percentage points compared with the previous year.

Cai said that starting this year, the industry's growth rate will stabilize. "Let the market decide the allocation of resources. Mergers and acquisitions will happen more quickly, and companies will take bigger risks in the future."

Cai forecast the sector will achieve 12 percent growth in both sales and profits in 2014 and export growth will be about 8 percent.

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